November 2014 Central London Deals

Central London office lettings in November 2014 reached 1m sq ft in 56 medium or large deals, representing a return to the monthly average for 2014

November was characterised by large lettings to Societe Generale, Threadneedle and Allied World amongst others.

The financial, insurance and media sectors topped the table of lettings by sector. Recent research by Metropolis has highlighted the growing importance of the healthcare and pharmaceutical company sector demand.

By area, the City accounted for 29pc of the deals, while Docklands was boosted by the large Societe Generale letting.

The volume of grade A (newly built or refurbished office space) let during the month grew to 650,000 sq ft as transactions in previously occupied space enjoyed a good month.

Property consultant DTZ estimates that London office take-up in 2014 could top 14m sq ft. It calculates that technical and media is taking 25% of take-up followed by insurance on 24%. The highest rents are being paid by oil companies and serviced office providers. DTZ picks out lettings to EY taking 205,000 sq ft at Canary Wharf; Mishcon de Reya taking 116,000 sq ft at Africa House, WC2, Amazon taking 430,000 sq ft at Principal Place and Omnicom’s 368,000 sq ft at Bankside 2 & 3 alongside M&G’s 320,000 sq ft pre-let of 120 Fenchurch Street, EC3 as its deals of the year.

Merry Christmas to all Metropolis Blog Readers


Office Forecasts for 2015

Lambert Smith Hampton has published its latest ‘UK Vitality Index’ and has identified Guildford in Surrey as the location most likely to see expansion in 2015.

Guildford has replaced Cambridge as the destination best placed to support economic expansion over the next 12 months.

Metropolis has over 20 live Surrey office requirements added this year, compared to a dozen in Cambridge.

The results are based on the analysis of 20 datasets, with each location ranked within six separate categories: most productive, fastest growing, most entrepreneurial, best educated, greenest and most affluent.

Overall, the top 10 towns and cities in the 2015 UK Vitality Index are:

St Albans
Milton Keynes

Oxford and York are both new entries into the top ten boosted by greater corporate investment and an increase in the number of recent business start-ups.

The report also identifies Manchester, Northampton and Derby as the most significant improvers over the past 12 months.

Metropolis would rank Edinburgh and Manchester as the locations with the most live requirements, with 40 new searches in Edinburgh in 2014 and 42 in Manchester in the last 12 months. With over 80% of UK GDP generated outside London and predictions of a revival in the regions next year, it is likely these towns and cities will prove increasingly important in 2015.

Construction costs rising

Construction costs for London projects are rising’, according to Aecom’s just-released 2014 London Contractors Survey.

The firm polled main contractors with a combined UK turnover of almost £7bn, plus 16 major subcontractors. The survey concluded that contractors are beginning to decline to tender on up to one in three higher risk projects and push up quotes on others.

Contractors including Laing O’Rourke, Mace, Kier, Brookfield Multiplex, Skanska and Willmott Dixon took part in the survey. Most of which are lined up to start major London office schemes in 2015, as featured in Metropolis and Cityoffice’s recent London Skyline survey.

Metropolis and Cityoffices calculate that there are already 80 london office projects scheduled to start next year, with more schemes at an earlier stage, which could also still start in the next 12 months. The likelihood is that contractors will enjoy more choice over projects to tender for.

The Aecom survey also found contractors moving towards earlier procurement. Some contractors are still proposing lump sum, single stage tender, but the client will pay higher costs.

Refurbishments schemes or complex projects which bring substantial risk for contractors are also attracting fewer bids from contractors according to Aecom.

Penalties for late completion of projects, which were relatively common in 2013, have now largely disappeared.

Aecom is forecasting that 2014 will record 5-6% tender price inflation in London, and is predicting inflation of 5.1% in 2015 and 5.3% in 2016. In previous years prices were falling.

Labour shortages are now the primary driver for price rises, especially in brickwork-related trades. Aecom is predicting that electrical engineers will be the next specialists to see strong pick-up in demand.

The Aecom survey also found that London contractors have on average already secured 71% of their turnover for 2015, which is higher than the 67% secured for 2014 at the same time last year.

Metropolis is forecasting a further rise in speculative projects in 2015, with an increased level of refurbishment and fit-out work driven by a strengthening pipeline of schemes and a large number of occupiers looking to tie-up deals.